Raising capital is a cornerstone of successful multifamily real estate investing. For emerging operators, understanding how to legally and strategically raise funds from passive investors is essential for closing deals and building long-term trust and credibility in the market.
In this blog, we’ll break down the foundational principles of raising capital for multifamily projects, discuss compliance considerations, and analyze the latest trends shaping investor sentiment in 2025.
Understanding the Capital Stack
Before reaching out to investors, operators must understand how the capital stack is structured. It generally includes:
- Senior Debt: Often provided by a bank or agency lender, making up 65–75% of the capital.
- Preferred Equity or Mezzanine Debt: A second layer of capital with a fixed return, sitting between debt and common equity.
Common Equity: Typically raised from Limited Partners (LPs) who share in the profits and risks.
Each layer comes with different risk profiles, return expectations, and control rights, so clarity here is crucial before soliciting investment.
Legal Framework: Regulation D Offerings
Most multifamily syndicators raise capital under Regulation D Rule 506(b) or 506(c) of the Securities Act:
- Rule 506(b): Allows raising from up to 35 non-accredited but sophisticated investors and unlimited accredited investors. No public advertising is allowed.
- Rule 506(c): Permits public solicitation, but investors must be verified as accredited.
In 2025, according to the SEC, over $1.6 trillion was raised through Regulation D offerings, with 70% of those funds flowing into real estate and private equity.
Understanding these rules—and working with a qualified securities attorney—is non-negotiable.
Building a Network of Passive Investors
For emerging sponsors, capital is raised through relationships before it’s raised through a pitch. The most effective operators:
- Build trust through education (webinars, newsletters, blogs)
- Provide transparency with data-rich offering memoranda
- Stay consistent with follow-ups and reporting.
A 2024 study by CrowdStreet revealed that 72% of individual investors prefer working with sponsors who offer repeat deal opportunities, suggesting that relationship-building is key to long-term scalability.
Investor Psychology in Today’s Market
Investor expectations have evolved post-pandemic and in light of inflationary pressure. Key trends in 2025 include:
- A strong preference for income-producing assets (multifamily remains top-tier)
- Caution around ground-up development unless backed by experienced teams
- Increased demand for monthly or quarterly distributions, even at lower projected returns
According to the 2025 Marcus & Millichap Multifamily Investment Forecast, private investor capital is projected to grow 8.1% year-over-year, with a notable focus on secondary and tertiary markets offering higher yield potential.
Effective Capital Raising Tactics
Some proven methods for attracting capital include:
- Investor Webinars & Educational Content: Provide context before pitching a deal.
- Investor CRM & Automated Workflows: Tools like SyndicationPro or InvestNext help manage communications and compliance.
- Third-Party Verification for 506(c): Services such as VerifyInvestor or EarlyIQ streamline the accreditation process.
Keep in mind: The clarity and simplicity of your pitch deck and financial projections often matter more than the projected returns themselves.
Final Thoughts
Raising capital for multifamily deals is both an art and a science. While compliance and financial modeling are essential, your ability to build trust and articulate the value of your offering will determine your long-term success as a syndicator.
As capital raising becomes more competitive, those who lead with education, transparency, and investor alignment will rise above the noise.
If you’re preparing for your next raise, consider conducting a compliance review, refreshing your investor materials, and staying updated on capital market shifts that impact investor decision-making.